Birch Hill Equity Partners Enters into an Agreement to Acquire HOMEQ Corporation for $9.50 per Common Share

HOMEQ Board recommends that Shareholders support the Transaction

TORONTO, March 30, 2012 /PRNewswire/ - HOMEQ Corporation ("HOMEQ") (TSX: HEQ) announced today that it has entered into an arrangement agreement (the "Arrangement Agreement") under which Birch Hill Equity Partners ("Birch Hill") will indirectly acquire all of the outstanding common shares (the "Shares") of HOMEQ (the "Arrangement") for cash at a price of $9.50 per Share  (the "Transaction") representing total equity value, on a fully diluted basis, of approximately $138 million.

The $9.50 per Share consideration represents a 22% premium over the volume-weighted average price of the Shares over the last 20 trading days on the Toronto Stock Exchange.

The Board of Directors of HOMEQ (the "Board"), based on the recommendation of its Special Committee (the "Special Committee") and with the benefit of advice from its financial and legal advisors, has determined that the Arrangement is in the best interests of HOMEQ. The Board has recommended that shareholders of HOMEQ (the "Shareholders") vote in favour of the Arrangement.

RBC Capital Markets, the financial advisor to the Special Committee and the Board, has provided an opinion to the Board subject to the assumptions, limitations and qualifications stated in such opinion, that the consideration to be received by the Shareholders under the Arrangement is fair from a financial point of view. The transaction with Birch Hill resulted from a comprehensive strategic review process undertaken by the Special Committee and its financial advisor, which concluded that the Shareholders would be best served by a change of control transaction.

"We are delighted that Birch Hill has recognized the inherent value in our business ", said Chairman of the Board, Gary Samuel. "We believe that the all cash offer is highly attractive to existing shareholders. Birch Hill's long-term track record of successfully investing in Canadian mid-market companies, and its ability to support HOMEQ's strategic initiatives, will assist HOMEQ in reaching its full potential and achieving its growth plans".

"Over the last 3 years we have achieved extremely encouraging volumes of mortgage originations and growth in our portfolio", added President and Chief Executive Officer, Steven Ranson. "Our new ownership structure will provide us with a reliable source of capital, enabling us to serve the financial needs of the burgeoning ranks of seniors, Canada's fastest growing demographic".

"We are excited about the prospect of participating in HOMEQ's future growth opportunities and the chance to build a leading financial services company focused on the needs of Canada's expanding population of seniors", stated John MacIntyre, partner at Birch Hill.

Details of the Arrangement

The Transaction will be carried out by way of a statutory Plan of Arrangement under the Business Corporations Act (Ontario), and will be subject to approval by at least two-thirds of the votes cast in person or by proxy at HOMEQ's annual and special meeting of Shareholders (the "Meeting") that is expected to be held on or before May 30, 2012.  The Transaction is also subject to the approval of the Ontario Superior Court of Justice subsequent to the Meeting.

Under the terms of the Arrangement Agreement between Birch Hill and HOMEQ, the Transaction is also subject to the receipt of applicable regulatory approvals (including approvals under the Bank Act and the Competition Act) and the satisfaction of certain closing conditions customary in transactions of this nature, including the absence of material adverse changes. The Arrangement is not conditional on Birch Hill obtaining financing.

The Arrangement Agreement contains customary non-solicitation provisions which restrict HOMEQ from soliciting or entertaining third party acquisition proposals, subject to customary "fiduciary out" provisions that entitle HOMEQ to consider and accept a superior proposal and a matching right in favour of Birch Hill. If the Arrangement Agreement is terminated in certain circumstances, including if HOMEQ enters into an agreement with respect to a superior proposal or if the Board withdraws its recommendation with respect to the Arrangement, Birch Hill is entitled to a termination payment of $5 million. HOMEQ is entitled to a reverse break fee of $7.5 million if the Arrangement Agreement is terminated in certain circumstances, and to a reverse break fee of $5 million in other circumstances.

HOMEQ's directors and certain senior officers have entered into voting and support agreements which provide that they will vote the Shares held by them in favour of the Arrangement.  As part of the Transaction, certain members of senior management, including Steven Ranson, and Daniel Jauernig, a director, will be rolling-over their equity interests in HOMEQ into equity in the entity that will be acquiring HOMEQ.

The dividend payable to shareholders of record on March 29, 2012, will be paid as scheduled on April 13, 2012. Thereafter, no further dividends will be declared.

The terms and conditions of the Arrangement will be summarized in HOMEQ's management information circular, which will be mailed to Shareholders. A copy of the Arrangement Agreement will be available on HOMEQ's website at www.homeq.ca and on SEDAR at www.sedar.com.

The Special Committee's and the Board's financial advisor is RBC Capital Markets and their legal counsel is Torys LLP. Birch Hill's financial advisor is Scotiabank and its legal counsel is McCarthy Tétrault LLP.

About HOMEQ

HOMEQ's wholly owned subsidiary HomEquity Bank is the only national provider of reverse mortgages to homeowners aged 55 and over, Canada's fastest growing demographic segment. HomEquity Bank originates and administers Canada's largest portfolio of reverse mortgages under the CHIP Home Income Plan brand. As of December 31, 2011, the mortgage portfolio comprised approximately 9,000 reverse mortgages with an accrued value of $1.2 billion, secured by residential properties across Canada worth approximately $3.3 billion. HomEquity Bank has been the main underwriter of reverse mortgages in Canada since its predecessor, Canadian Home Income Plan, pioneered the concept in 1986.

HOMEQ's shares trade on the Toronto Stock Exchange under the symbol HEQ.  Additional information on HOMEQ, including annual and quarterly reports can be viewed at www.homeq.ca.

About Birch Hill

With $2 billion in capital under management, 20 partner companies and 30 fully realized investments since 1994; Birch Hill is the leader in long-term value creation in the Canadian mid market. For more information about Birch Hill Equity Partners, please visit www.birchhillequity.com.

Forward-Looking Information

Certain statements included herein constitute "forward-looking statements". All statements, other than statements of historical fact, included in this release that address future activities, events, developments or financial performance are forward-looking statements. These forward-looking statements can be identified by the use of forward-looking words such as "may", "should", "will", "could", "expect", "intend", "plan", "estimate", "anticipate", "believe", "future" or "continue" or the negative thereof or similar variations. In particular, statements about the proposed Arrangement between Birch Hill and HOMEQ, including the expected timetable for completing the Transaction, the receipt of Shareholder and regulatory approvals and any other statements regarding HOMEQ's future expectations, beliefs, goals or prospects are or involve forward-looking information. These forward-looking statements are based on certain assumptions and analyses made by Birch Hill and HOMEQ and their respective managements, in light of their experiences and their perception of historical trends, current conditions and expected future developments, as well as other factors they believe are appropriate in the circumstances. Shareholders are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties, assumptions and other factors, many of which are outside the control of Birch Hill and HOMEQ, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, among other things, the parties' ability to consummate the Arrangement; the parties' ability to satisfy the conditions to the completion of the Arrangement, including that the receipt of Shareholder approval, court approval, or regulatory approval for the Arrangement may not be obtained, or may not be obtained on the terms expected or on the anticipated schedule; general economic and market factors (including changes in global, national or regional financial, credit, currency or securities markets), changes or developments in global, national or regional political conditions (including any act of terrorism or war), changes in government laws or regulations (including tax laws) and changes in GAAP or regulatory accounting requirements. Readers are cautioned that the foregoing lists are not exhaustive.

Such forward-looking statements should, therefore, be construed in light of such factors. If any of these risks or uncertainties were to materialize, or if the factors and assumptions underlying the forward-looking information were to prove incorrect, actual results could vary materially from those that are expressed or implied by the forward-looking information contained herein. All forward-looking statements attributable to HOMEQ, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements set forth above. Readers are cautioned not to place undue reliance on forward-looking statements contained herein, which reflect the analysis of the management of Birch Hill or HOMEQ, as appropriate, only as of the date of this release.

For more information regarding these and other risks, readers should consult HOMEQ's reports on file with applicable securities regulatory authorities accessible online by going to SEDAR at www.sedar.com or by going to the HOMEQ website at www.homeq.ca. HOMEQ is under no obligation, and each of HOMEQ and Birch Hill expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

SOURCE HOMEQ Corporation